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Microsoft Retail Stores Embraced By Partners -- Mostly

Although Microsoft will be opening retail outlets in the near future, its channel partners largely do not see a big conflict with the behemoth's new approach.

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"It is possible that existing Microsoft Partners will lose a few small or home clients, but the vast majority of Microsoft sales business should remain unaffected," said Ronnie Parisella, CTO at Primary Support, New York, N.Y. Resellers such as Primary Support that focus on the Microsoft's Corporate and Enterprise products, rather than its home and consumer lines, should be relatively unaffected, he said.

David Lee, CEO of IT Technology Services, a Norwalk, Conn.-based solution provider, said the impact of Microsoft's retail stores would depend on which products are sold and if the company offers services for them.

"I know they're pretty big and nasty in that if they want, they could put you out of business, but I'm in the services game and I'm more interested in business applications," Lee said. "It could just be another place to buy Microsoft products and if I can't get something quickly, I can go to their store to get it. Overall, if they want to be like Apple, be like Apple."

Specifics of when and where haven't been released yet, but that will likely be the top of David Porter's "to-do" list when he starts in his newly created position of corporate vice president of Retail Stores on Feb. 16.

The move is not especially surprising to many in the channel.

"You have to remind yourself: Microsoft is not only the retailer but also the manufacturer," said Dan Foster, president, of Tel-Star Business Development Group, Alpharetta, Ga. "It has all of this code that it sells in nice boxes with fancy decorations, but after that, their cost is next to nothing. The bigger the distribution model, the more money they make."

Parisella agreed, noting that Microsoft's Zune player is a perfect fit for the new model: "I think Microsoft's move to retail sales was a predictable one. Now that their Zune software and subscription service officially rivals Apple's iTunes, it makes sense that Microsoft would want to reach a wider audience with the Zune devices."

In fact, it may be the next step for Microsoft to take to grow its business, particularly after it has seen how well the model has worked for Apple.

"Microsoft's announcement that it will be opening retail outlets is a logical extension of its business model as it competes with hardware and software vendors -- especially in the phone, music player and video game space," said Phil Aldrich, director of Microsoft Solutions at Dimension Data Americas. "It's a competitive necessity for it to move into the retail space to compete more effectively in the home entertainment and small device markets."

In other words, in a challenging economic environment, Microsoft is doing what is necessary to not only compete but be a dominant market force. "I think a lot of companies are going to have to do some very innovative things to make sure things stay on track," Foster said.

After the failure not only of Vista to attract consumer support but also its recent advertising campaign featuring Bill Gates, the company is in need of an image makeover, said Alani Kuye, managing partner at Phantom Data Systems in Norwalk, Conn. "Microsoft needs to be cool again, period!" A retail outlet can provide a "solutions pavilion" that will provide customers direct access to Microsoft products.

"I strongly believe this will serve them very well, considering the direct access customers will have to Microsoft products," Kuye said. "Their competitors -- predominantly Apple in the retail space -- have a major problem on their hands. Apple has bitten into Microsoft's retail market share using this very same strategy. I'm afraid Microsoft, having deep pockets and a farther reach in both the retail and enterprise spaces, will surely pose a major problem to its competitors."

Indeed, while many agree with Foster's view that the increased exposure of Microsoft's product line will help VARs, there are some concerns the software giant's partner focus will become murky.

"I guess they really preach that they're a partner-driven company, and a lot of their product lines are not something you could sell through a retail chain," said Joseph Longo, vice president of sales, SBS Group, Woodbridge, N.J . "I guess until the details come out in terms of what they're coming out with and what they're selling, we'll have to keep our eye on it."

Scott Campbell and Chad Berndtson contributed to this article.

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